Is SSA GT Betting Infini(um)tely On Acquisitions? Part Three: Complementary Products

Complementary Products

On October 28, SSA Global Technologies, Inc. (SSA GT), www.ssagt.com, a worldwide enterprise solutions and services provider, announced it has entered into an agreement to acquire 100% of the common stock of Infinium Software (NASDAQ: INFM), www.infinium.com , another like provider, although mainly within different industry segments. In the agreement, each outstanding share of common stock will be converted into the right to receive $7.00 per share in cash. The agreement specifies that the transaction is subject to approval of Infinium's shareholders as well as regulatory and certain other customary conditions. The transaction is expected to close before January 1, 2003 at which time Infinium should become wholly owned by SSA GT. This is a continuation of the discussion of the Market Impact.

At a first glance, one can even notice that the complementary nature of some SSA GT products and Infinium products may indeed provide a kick for a buck' proposition. Concurrently with interconnectivity and workflow enablement of its suite, Infinium has also developed strong back-office functionality, particularly HR/payroll and financial management suites, which have traditionally been SSA GT's quite weaker side. Infinium Financial Management was devised to help organization streamline the entire financial management chain, from budgeting expenses, to recording transactions and forecasting revenue, and was designed with strong internal controls to ensure accuracy and compliance while inherent flexibility should provide the ability to grow and adapt to business change. The suite includes the following modules: general ledger, accounts receivable, accounts payable, fixed assets, purchase management, project accounting, self service, global taxation, income reporting, and budgeting, while treasury management is offered through partnering.

Infinium Human Resources is a comprehensive HR/Payroll solution devised to enable organizations to manage and motivate their workforce, minimize administrative tasks, and empower HR to play a strategic role in their overall success, which encroaches onto the Human Capital Management (HCM) realm. It offers many HR-related functional requirements, from compensation and benefits management and in-depth employee training and career-path tracking features, to workforce management and critical line-manager empowerment. The suite offers the following modules: HR administration, payroll, benefits administration, manager and employee self-service, training administration, and recruiting management. Also, Infinium Corporate Performance Manager (CPM), powered by Cognos, ensures effective data utilization, as only the necessary data is used during any transaction or update, and is put into the appropriate business context. Given SSA GT's reliance on partnering with Cognos within the similar area, one would discern yet another touching point.

Also worth mentioning is Infinium CRM, a fully-integrated, flexible, Web-based solution, which the company gained through its acquisition in early 2000 of then Dutch CRM vendor Dexton Information Systems. The suite supports many aspects of business relationship management, through many functional modules for sales force automation (SFA) and marketing automation, and customer support services with a single, central market database. Although the product features integration to other ERP systems like SAP, J.D. Edwards, SSA GT and Geac (former JBA), it has had a very limited success as stand-alone offering after the acquisition, partly owing to process industries' lesser interest in certain CRM modules like call centers. However, likewise add-on to Infinium's original ERP modules, it might likely create a compelling value proposition for the rest of SSA GT's primarily discrete manufacturing products provided it is also tailored for specific vertical industries.

As mentioned earlier, the Infinium Process Manufacturing product seems to be a good fit for certain areas within process manufacturing, which entails small-to-medium sized enterprises that run in the batch (vs. continuous) manufacturing mode. It features strengths in formula/recipe management and hazardous material control and regulatory compliance (e.g., MSDS, SARA Title III environmental regulations, and laboratory inspection management system (LIMS)) functions that make it a good solution particularly for some food and chemical industries (e.g., paints and coatings).

The company has indicated intended delivery of functionality that is often required for food & beverage industry (e.g., catch weights' and potency) in the foreseeable future. The offering, however, lacks strong natively provided forecasting, supplier relationship management (SRM), and SCM including finite scheduling, warehouse management system (WMS) and transportation management. To that end, one could envision Warehouse BOSS, a rules-based stand-alone warehouse management system (WMS) and MK Logistics, an e-fulfillment distribution management package fitting the bill. Warehouse BOSS, as a matter of interest, exhibited functionality several years ago that many leading WHS vendors have only recently incorporated. MK Logistics has also been recently enhanced to provide functionality specific to Third Party Logistics (3PL) providers. Furthermore, the still relatively lower penetration and the smaller number of competitors in the process manufacturing market (compared to the discrete manufacturing) remain the company's opportunity, and it may have a fair shot at pursuing it given over 350 existing process manufacturing customers and the likely push from SSA GT's muscle.

This is Part Three of a four-part article on recent developments at SSA GT.

Part One covered the announcements.

Part Two began the discussion of the Market Impact.

Part Four will discuss Challenges and make User Recommendations.

Global Markets

Also, despite its fair global presence, which has somewhat diminished lately owing to some offices closure, Infinium remains largely established North American vendor, with over 80% revenues coming from this market. Consequently, very few practitioners are aware that, for example, Infinium financial and HR/Payroll modules often can go head to head against the likes of SAP, Oracle, PeopleSoft, J.D. Edwards and Lawson, with an additional benefit of flexibility and ease of use. The situation should also be mitigated with SSA GT's portal addition to Infinium, which has been remiss to a degree with its portal strategy, in addition to SSA GT's infrastructure and brand recognition boost.

Thus, although mergers and/or acquisitions in the mid-market in the recent times are no surprise whatsoever, SSA GT's action might have an additional meaning. Although the acquisition of Infinium should have little impact on the global market in the short run, it might have an important psychological effect on existing aged AS/400 customer enclaves, that with this little empire in rebuilding, should obtain a further sigh of relief. The AS/400 platform is also getting a new lease of life from J2EE enhancement, providing a sound alternative to up and coming Microsoft .NET platform and to its army of proponents spearheaded by Microsoft Business Solutions (see Microsoft Lays Enforced-Concrete Foundation For Its Business Solutions).

To be fair, the SSA GT's progenitor, former SSA, had suffered, over the past several years, a tremendous loss of market share and customer confidence, while its channel also dwindled during the same period of time. Revenues for SSA GT, which now owned by over a $7 billion high-tech venture capital firm Cerberus is still only a fraction of once SSA's over $450 million turnover in the mid 1990s, though. Therefore, SSA GT, having gone through its bankruptcy and rebirth initially under the Gores Technology in 2000, has been charging back within Top 10 ERP vendors' club, although still steeply down from once being neck to neck with J.D. Edwards. To that end, the acquisition should be a sign of SSA GT's continued commitment to regain its former glory and the clout in the sector. The combined company still projects revenues in fiscal 2003 to be around $330 million, which should entrench it within the Top 10 of the ERP rating list. In some individual markets like Japan or Brazil, though, the company even claims to be second to only SAP.

Understanding Customers

It appears that SSA GT understands and listens closely (via Global Guide Groups) to the needs of conservative ERP customers that are unwilling to ditch a good functional product even at a cost of its technological antiquity. Further, it has a track record of strong functional development that preserves the customer's current investment. Indeed, BPCS V8 is a scaleable ERP system extended beyond traditional ERP boundaries, with several manufacturing mode flavors such as discrete lean manufacturing, assemble-to-order (ATO) and make-to-order (MTO) operations, and even process manufacturing.

Further, it even borders on a miracle the fact that SSA GT, which has had its own share of trouble, has even shown some success with managing such a seemingly unwieldy set of disparate products, considering that a vendor of CA's stature was not able to do much with almost a dozen products, some being of vintage '78 or '82 tag (which some may refer to the medieval era of computing). To that end, recent enhancements within the latest releases of PRMS 9.2, BPCS 8.2, KBM 2.2, and Warehouse BOSS 6.2 are ever more impressive given the market skepticism about the viability of these.

Even the venerable MANMAN product has had some enhancements in its version 12, although this product faces the impending predicament of the HP e3000 hardware platform discontinuation in 2003. To that end, migration to MK Manufacturing or to SSA GT MAX+ might be a viable option for these customers, and might prove that it was not necessarily mere an impulse purchase, and that SSA GT might have some ideas as what to do with MAX after all. The mature but less-known product globally has a user base of around 100 in the UK with a further over 250 ever burgeoning customer base in certain European markets, such as the Czech and Polish markets for example.

The product has not previously been marketed in the US and was only recently introduced to the Asia Pacific region. As for product scope, MAX has integrated ERP, BI, WMS, portals and basic CRM functionality crafted for its small-to-medium enterprise (SME) manufacturing, distribution and service markets. With support for platforms like Windows NT/2000, Unix, and SQL Server, and Microsoft Windows fat client and IE browser, all based on n-tier client/server architecture, the product could provide an alternative solution outside the IBM iSeries sphere.

Therefore, current SSA GT's management seems to understand its charter, and has already shown that small miracles can happen. SSA GT's recent watchwords for customers are return on investment (ROI), total cost of ownership (TCO), and new product releases and versions included in the maintenance fee. To be fair, SSA GT has mostly achieved its most imminent and important goal of enticing existing customers to stay on their maintenance contracts. With several thousands accounts having signed up for continued support so far, SSA GT has secured a sound revenue base, although that might not sustain it while keeping BPCS and its several recently adopted brethren abreast of the latest technology and functionality scope. Therefore, the above product strategy blueprint is sound provided the new management team continues with an established good track record for on-time delivery of promised functionality.

SSA GT plans to keep previous BPCS versions alive, making new functionality backward compatible and adding enterprise architecture to tie multiple product versions together with a common portal. It might be a compelling story to its target market if the company can execute on these ambitious plans that are pushing the right buttons: customer retention, industry verticals enhancements, and keeping older versions alive. Additionally, SSA GT's and interBiz' established global infrastructure and customer base, strong core-ERP functionality with a sharp industry focus and regulatory compliance, strong multinational product functionality (support for 20 languages), and a relative ease of implementing these are some of the company's bargaining chips in the game of keeping its customers from defecting and of giving other intruding competitors run for their money.

Actually, vendors vying to be replacement solutions for, e.g., the BPCS or PRMS ERP systems could be in for a bigger hurdle than expected as the SSA GT strategy might resonate with manufacturers that have been happy with these products and are reticent to replace functioning ERP system deeply embedded in plants worldwide, particularly in these days of reduced budgets.

This concludes Part Three of a four-part article on recent development at SSA GT.

Part One covered the announcements.

Part Two began the discussion of the Market Impact.

Part Four will cover Challenges and make User Recommendations.